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AIG CEO Robert Benmosche will get a $7 million annual salary after his predecessor worked for $1 and said better pay is needed to retain a qualified leader.

Benmosche, who started Aug. 10 as CEO and president and is currently on vacation in Croatia, will get $3 million in cash and $4 million in common stock, AIG said yesterday in a regulatory filing. Benmosche, 65, is also eligible for as much as $3.5 million a year in stock as part of a long-term incentive program.

The former MetLife CEO has to retain customers and employees to preserve the value of AIG units that will need to be sold to repay loans included in the company’s $182.5 billion rescue. He replaced Edward Liddy, the ex-Allstate chief who was appointed in September 2008 after the insurer agreed to turn over a majority stake to the US to avoid collapse.

Benmosche’s agreement was approved “in principle” by Kenneth Feinberg, the Obama administration’s so-called special master for pay at firms that took the most bailout funds, AIG said. Benmosche isn’t eligible for severance if he’s terminated.